Online share trading: How to get started
Niall Firth, Daily Mail2 February 2009
The thought of buying and selling shares for the first time can be a daunting prospect. For the absolute novice, it probably conjures up all sorts of images: the hectic dealing room full of frantic bankers barking down and surrounded by flashing screens.
And of course there is the impenetrable jargon: shares are squeezy, markets are uneasy, investors are queasy. But for the cautious small-time investor, online trading is a handy and unintimidating introduction to the stock market.
There are at least 100 different online share trading websites available, each with a varying combination of pricing and trading options.
There are a number of reasons to consider investing online rather than turning to more traditional trading systems - particularly for those only intending to invest small amounts.
The first big advantage is cost. Traditional brokers usually charge a percentage fee of the overall cost of the trade - this can quickly mount up on trades that involve larger sums.
By contrast, most online trading sites charge a flat, one-off admin fee ranging from £7 to £20 per trade, while others also levy a small quarterly or annual membership fee. For example, The Share Centre charges £80 a year but then charges a flat fee of just £7.50 per trade.
Some, like Interactive Investor or Self-trade.co.uk, charge between £10-12.50 per trade while others charge an inactivity fee if you fail to make a certain number of trades a month.
When choosing an online trading site it is advisable to look not just at what they charge, but also what extra features they offer. The Share Centre allows nervous first-time users to practise with up to £15,000 of 'fantasy' money before they feel confident enough to start piling in with their own hard-earned cash.
Many provide free research and analytical tools detailing your chosen firm's recent financial history, and dispense hints and tips from top analysts. Others also issue a regular newsletter with trading tips and investing advice.
Guy Knight, of the Share Centre, says he has seen a huge increase in the number of people who are turning to online share-dealing. Its immediacy and simplicity are what makes it so appealing to new users, he adds.
But he also warns: 'Trading online can be very exciting and quick. But just because you can do a deal doesn't mean you always should.'
Buying shares online is disconcertingly simple. An online account can be set up within 15 minutes by filling out an application form and choosing a password. Your details will then often have to be verified with a bank statement within 31 days.
To buy shares in a particular company you simply search for the company you are interested in and click to buy. After entering either the number of shares you wish to purchase or the amount you intend to spend, a box pops up giving you around 15 seconds to decide whether you want to accept the price offered.
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